The Multilateralist

Who’s a “developing country”? You’d be surprised.

In today’s world, one of the basic identities that a country has is its position on the continuum from less developed to developing and, finally, to developed. The working assumption is that a country wants to move from one category to the next. And in terms of a country’s economic output, that’s probably reasonable. But ...

In today’s world, one of the basic identities that a country has is its position on the continuum from less developed to developing and, finally, to developed. The working assumption is that a country wants to move from one category to the next. And in terms of a country’s economic output, that’s probably reasonable.

But it turns out that wanting to develop and wanting to be classified as "developed" are two quite different things. Particularly when it comes to international trade, there are pocketbook reasons that a country might prefer to remain "developing" long after economic data and common sense remove it from that category. Some of the key international trade agreements underlying the World Trade Organization, in particular, offer special benefits to developing countries:

Developing country status in the WTO brings certain rights. There are for example provisions in some WTO Agreements which provide developing countries with longer transition periods before they are required to fully implement the agreement and developing countries can receive technical assistance.

It all sounds fair enough. The catch is that there’s no standard system–such as a GDP per capita figure or a certain volume of exports–for determining when a country has passed from developing to developed. Different international organizations apply different standards. The United Nations maintains a list of the world’s least developed countries, and it also divides the globe into developing and developed regions, although not countries.  The World Bank maintains slightly different categories of low, middle, and high-income. The International Monetary Fund has its own hybrid system of classification.

For its part, the WTO has no classification system. Instead, countries declare their status and, consequently, their eligibility for the trade benefits accorded to developing countries. They often do so à la carte, claiming developing country status for certain agreements but not others. This murky honor system produces some odd results.  South Korea, Mexico, and Turkey are members of the elite G-20 and the OECD (traditionally thought of as the rich-country club) but when it comes to WTO matters, they sometimes claim to be developing. Israel is another OECD member that has taken advantage of developing-country benefits.

Some observers believe that the dysfunctionalities of the self-declaration system go even deeper. Gary Clyde Hufbauer, a former U.S. Treasury Department official now at the Peterson Institute for International Economics, argues that the special allowances were originally designed to give breathing space to countries that had trouble entering the world trading system. He sees no reason that exporting powerhouses like China and Brazil–let alone the aforementioned OECD members–should be able to claim special trade privileges.

That kind of complaint normally elicits an empassioned defense from these emerging economies: We may be coming economic powers, they insist, but we are have millions of poor citizens. It’s an argument that still carries moral weight, although less than in the past. As China and other emerging economies grow healthily, the West is less and less sympathetic to their claims of penury.

Not that there’s much Washington, Tokyo or Brussels can do about it. The practice of self-declaring is by now built deep into the WTO structure, and attempts to reform the system have gotten nowhere. For the time being, a developing country at the WTO is whoever claims to be one.

Trending Now Sponsored Links by Taboola

By Taboola

More from Foreign Policy

By Taboola